Spain Impressive economic growth, once again

Key takeaways
 

• The Spanish economy will close 2025 again with impressive growth, well above the European average. Forecasts point to somewhat lower growth in 2026, driven by consumption and private investment (including real estate).
• Strong growth is allowing progressive fiscal adjustment, with a deficit/GDP ratio that, according to the Bank of Spain, will be below 3% and a debt/GDP level of 100%.
• Spanish assets have reflected this good economic tone with strong performance. In fixed income, the Spanish risk premium (the difference between the yield on the Spanish 10-year bond and the German Bund of the same term) has fallen to levels of 50 basis points (bps) below the French premium (currently around 77bps). As regards equity income, the Ibex 35 has far exceeded the revaluations of its European counterparts, rising to record highs, largely thanks to the high weight of banking stocks.
• Despite these positive figures, Spanish productivity remains much lower than that of its European competitors, in addition to structural problems such as housing shortages and limited progress in reducing the structural deficit.
• Sustaining this high economic growth will be difficult in the absence of reforms to boost efficiency and innovation.